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Over the last few days, the retail prices of petrol and diesel have touched an all-time high.  In Delhi, petrol was selling at 74.6/litre on April 25, 2018, while diesel was at 66/litre.

Petroleum products are used as raw materials in various sectors and industries such as transport and petrochemicals.  These products may also be used in factories to operate machinery or generators.  Any fluctuation in the price of petrol and diesel impacts the production and transport costs of various items.  When compared to other neighbouring countries, India has the highest prices for petrol and diesel.

Note: Prices as on April 1, 2018. Prices for India pertain to Delhi. Sources: Petroleum Planning and Analysis Cell, Ministry of Petroleum and Natural Gas; PRS.

Note: Prices as on April 1, 2018. Prices for India pertain to Delhi.
Sources: Petroleum Planning and Analysis Cell, Ministry of Petroleum and Natural Gas; PRS.

How is the price of petrol and diesel fixed?

Historically, the price of petrol and diesel in India was regulated, i.e. the government was involved in the deciding the retail price.  The government deregulated the pricing of petrol in 2010 and diesel in 2014.  This allowed oil marketing companies to determine the price of these products, and revise them every fortnight.

Starting June 16, 2017, prices for petrol and diesel are revised on a daily basis.  This was done to with the idea that daily revision will reduce the volatility in retail prices, and protect the consumer against sharp fluctuations.  The break-up of retail prices of petrol and diesel in Delhi on April 25, 2018 can be found below.  As seen in the table, over 50% of the retail price of petrol comprises central and states taxes and the dealer’s commission.  In case of diesel, this amount is close to 40%.

Table 1: Break-up of petrol and diesel prices in Delhi (on April 25, 2018)

Component

Petrol

Diesel

Rs/litre % of retail price Rs/litre

% of retail price

Price Charged to Dealers 35.7 48% 38.4 58%
Excise Duty (levied by centre) 19.5 26% 15.3 23%
Dealer Commission 3.6 5% 2.5 4%
VAT (levied by state) 15.9 21% 9.7 15%
Retail Price 74.6 100% 65.9 100%
Source: Price Build-up of Petrol and Diesel at Delhi effective April 25, 2018; Indian Oil Corporation Limited.

 

Does India produce enough petroleum to support domestic consumption?

India imports 84% of the petroleum products consumed in the country.  This implies that any change in the global prices of crude oil has a significant impact on the domestic price of petroleum products.  In 2000-01, net import of petroleum products constituted 75% of the total consumption in the country.  This increased to 95% in 2016-17.  The figure below shows the amount of petroleum products consumed in the country, and the share of imports.

Note: Production is the difference between the total consumption in the country and the net imports. Sources: Petroleum Planning and Analysis Cell; PRS.

Note: Production is the difference between the total consumption in the country and the net imports.
Sources: Petroleum Planning and Analysis Cell; PRS.

What has been the global trend in crude oil prices? How has this impacted prices in India?

Over the last five years, the global price of crude oil (Indian basket) has come down from USD 110 in January 2013 to USD 64 in March 2018, having touched a low of USD 28 in January 2016.

While there has been a 42% drop in the price of global crude over this five-period, the retail price of petrol in India has increased by 8%.  During this period, the retail price of diesel increased by 33%.  The two figures below show the trend in prices of global crude oil and retail price of petrol and diesel in India, over the last five years.

Petrol price

Diesel price

 

Note: Subsidy indicated in the graphs is notional.  While calculating the subsidy amount, other factors such as cost of domestic inputs will also have to be accounted.  Global Crude Oil Price is for the Indian basket.  Figures reflect average monthly retail price of petrol and diesel in Delhi.
Sources: Petroleum Planning and Analysis Cell; Indian Oil Corporation Limited; PRS.

 

How has the excise duty on petrol and diesel changed over the last few years?

Under the Constitution, the central government has the powers to tax the production of petroleum products, while states have the power to tax their sale.  Petroleum has been kept outside the purview of the Goods and Services Tax (GST), till the GST Council decides.

Over the years, the central government has used taxes to prevent sharp fluctuations in the retail price of diesel and petrol.  In the past, when global crude oil prices have increased, duties have been cut.  Since 2014, as global crude oil prices declined, excise duties have been increased.

Sources: Petroleum Planning and Analysis Cell; PRS.

Sources: Petroleum Planning and Analysis Cell; PRS.

 

As a consequence of the increase in duties, the central government’s revenue from excise on petrol and diesel increased annually at a rate of 46% between 2013-14 and 2016-17.  During the same period, the total sales tax collections of states (from petrol and diesel) increased annually by 9%.  The figure below shows the trend in overall collections of the central and state governments from petroleum (including receipts from taxes, royalties, and dividends).

 

Notes: Data includes tax collections (from cesses, royalties, customs duty, central excise duty, state sales tax, octroi, and entry tax, among others), dividends paid to the government, and profit on oil exploration. Data sources: Petroleum and Planning Analysis Cell; Central Board of Excise and Customs; Indian Oil Corporation Limited; PRS.

Notes: Data includes tax collections (from cesses, royalties, customs duty, central excise duty, state sales tax, octroi, and entry tax, among others), dividends paid to the government, and profit on oil exploration.
Data sources: Petroleum and Planning Analysis Cell; Central Board of Excise and Customs; Indian Oil Corporation Limited; PRS.

The elections for the next Vice-President of India are underway today.  The current Vice President Dr. Hamid Ansari will complete his second five-year term on August 10, which is in a few days.  While the BJP-led NDA’s candidate is Mr. Venkaiah Naidu, Dr. Gopalkrishna Gandhi is the joint candidate fronted by 18 opposition parties led by the INC.  In this post, we take a closer look at the constitutional mandate and role of the Vice-President of India and how the elections for the post will play out today.

Constitutional mandate as Vice President

The Vice-President is the second-highest constitutional office in India.  He acts as the President in the absence of the incumbent President, and is the ex officio Chairman of Rajya Sabha.  As an indication of his bipartisanship and apolitical character, the Vice-President does not hold membership of any political party or any other office of profit.   Further, given his constitutional stature, the statements given by the Vice President assume national significance.  The outgoing Vice President’s statements on issues like press freedom and welfare of minority communities led to several media debates and attracted widespread attention.

Vice-President’s role as Chairman of the Rajya Sabha

As Chairman of Rajya Sabha, the Vice President is the final authority on the interpretation of the Constitution and the Rules of Procedure for all house-related matters.  His rulings constitute binding precedent.  He also determines whether a Rajya Sabha member stands to be disqualified on grounds of defection.  Such powers make him an important stakeholder in the functioning of our parliamentary democracy.

The Vice President is also vested with powers to improve the functioning of the Upper House.  There have been several instances where the current Vice President has used his powers to address issues ranging from improving the productivity of question hour, reducing prolonged disruptions, maintaining decorum in the House, to facilitating discussion on issues of national importance.

Addressing disruptions: In March 2010, the Vice President ordered seven MPs to be evicted from the House for causing disruptions during the discussion and passage of the Women’s Reservation Bill.  More recently, in December 2015, the Vice President called for an all-party meeting during the last leg of the then ongoing Winter Session to discuss the matter of continuous disruptions in the House.  The remaining three days of the session after the all-party meet recorded 79% productivity, while the House had recorded overall productivity of 51% that session.

Functioning of Question Hour: In another instance, in November 2014, the Vice President issued a direction to conduct question hour from 12 noon to 1 pm instead of the originally allocated first hour of the day.  This was seen as an attempt to address the issue of low productivity of question hour mostly due to disruptions at the start of the day. However, question hour productivity has not shown any significant improvement yet, with continuing disruptions.

Parliamentary Privilege: Parliamentary privilege refers to rights and immunity enjoyed by Parliament and MPs, which may be necessary to effectively discharge their constitutional functions.  When disregarded, the offence is called a breach of privilege and is punishable under law. The Chairman is the guardian of these privileges and can also issue warrants to execute the orders of the House, where necessary.  In 1967, one person was held to be in contempt of Rajya Sabha for throwing leaflets from the visitors’ gallery of the House.  The then Vice President, in accordance with the resolution of the House, had sentenced the person to simple imprisonment, till the conclusion of that session.

The Chairman’s consent is required to raise a question of breach of privilege.  He also has the discretion whether to refer it to the Privileges Committee, and whether to accept the committee’s recommendations.  In October 2015, the current Vice President had referred the matter of a member’s controversial “terrorists in Parliament” remark to the Privileges Committee upon receiving complaints from several opposition MPs.

Role in Parliamentary Committees and other institutions

Parliamentary committees review proposed laws, oversee activities of the executive, and scrutinise government’s expenditure.  The Vice President nominates members to various Parliamentary Committees, appoints their Chairmen and issues directions to them.  The Vice President also nominates members of the Rajya Sabha on various bodies such as the Haj Committee, the Institute of Constitutional and Parliamentary Studies, Courts of several universities such as JNU, etc. He is also on the three-member Committee which nominates the Chairman of the Press Council of India.

So, how is the Vice President elected?

Unlike Presidential elections, MLAs do not have a vote in these elections.  Dr. B R Ambedkar had explained why during the constituent assembly debates: “The President is the Head of the State and his powers extend both to the administration by the centre as well as of the states… But when we come to the Vice-President, his normal functions are merely to preside over the Council of States.  It is only on a rare occasion, and that too for a temporary period, that he may be called upon to assume the duties of a President”.

Therefore, the Electoral College for the Vice- Presidential elections consists of all 790 MPs.  The elections are conducted using the system of single transferable voting that results in (approximately) proportional representation.  The voting is done through secret ballot implying that parties cannot issue whips to their MPs and anti-defection laws do not apply.

Each voter has one vote with the same value of 1.  Every voter can mark as many preferences, as there are candidates contesting the election.  It is necessary for at least the first preference to be marked.  A candidate needs to win a required number of votes (or the quota) to be elected.  If no one achieves the required quota after the first round of counting the first preference votes, the candidate with the lowest votes is eliminated.  His votes are then transferred to the second preference mentioned (if any) on the votes he received.  If no one achieves the required quota again, the process is repeated till either:

  1. a candidate achieves the required quota, or
  2. all candidates, except one, are eliminated.

The upcoming Vice Presidential elections

Let us now determine the quota required for victory in today’s election. The total value of votes of the electoral college is divided by two, and one is added (to ensure a majority) to the quotient to determine the quota. Hence, the quota is calculated as:

Quota    = 790/2 + 1 = 395 + 1= 396

The candidate who gets 396 votes will win the election.  If no candidate gets to this mark, the second and further preferences may be counted until the mark is reached or all candidates, but one, are eliminated.

We know the number of seats held by each party in Parliament. Let us assume that all MPs vote along their party line.  The position of the NDA and UPA is depicted in the figure below at the two ends of the chart.  All other major parties and independents are marked in the middle.

VP quota

We observe that, while the BJP falls short of the quota by 58 votes, the shortfall can be overcome if NDA allies TDP, Shiv Sena, Shiromani Akali Dal, LJP and PDP support its candidate.

With the voting taking place this morning, the outcome and results will become clear by later today.  It is hoped that the new Vice President will uphold the twin constitutional mandates as the second highest constitutional functionary and the Chairman of Rajya Sabha, just as his distinguished predecessors have done.